Investors hoping for a spike in rental demand will be disappointed with the government’s decision to keep mortgage insurance rules as they are — the Finance minister offering a budget that does nothing to tighten qualifying terms for potential homebuyers.

While moving to cut 19,200 bureaucratic jobs over the next three years with an eye toward slashing $5 billion a year from the federal budget, Jim Flaherty left the current regime of mortgage rules in place.

The reprieve, at least for now, was anticipated by mortgage industry leaders from one end of the country to the next, but effectively denies landlords any increase in demand for their units resulting from stricter qualifying standards for homebuyers.

It means rent increases are also unlikely.

With today’s budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.

Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.

Exactly a week prior to Thursday’s communiqué, Flaherty used a media scrum to suggest he would resist calls for stricter rules.

“I find it a bit off that some of the bank executives are taking the position that the Minister of Finance or the government somehow should tell them how to run their business,” Jim Flaherty told reporters just outside Ottawa Thursday. “They decide what they want to charge in interest rates.

“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed.”

Still, The government did move to shore up some areas of mortgage industry oversight: it will bring in legislation to provide increased oversight of CMHC commercial activities; and legislation for covered bonds, which will be administered by CMHC.\

Todays market is bringing alot of questions about whether you should consider refinancing your mortgage for a better rate. There are many different reasons people might re-negotiate their current mortgage. You may be considering using some of the equity in your home you have built up and use it to buy a rental property, Make and RRSP contribution or investment, pay off some high interest rate debt or just renegotiate your current rate for a better more competitive rate and lower monthly payment.

Below are some ways in which you can get a good idea on what kind of penalty you may be faced should you want to refinance your current mortgage. Again these are used simply as a guideline and are in no way exact. The lending institution you are currently dealing with will give you the exact amounts relating to your specifac situation.

Calculating Payout Penalties & Interest Rate Differentials (IRD)

Many closed mortgages include a clause stating that the payout privilege on the mortgage will be a three-month interest penalty, or interest differential, whichever is greater.

For the calculations below, using the following scenario:

$300,000 remaining on the mortgage

3 years into a 5-year fixed term at 5.5%

Today’s interest rate: 3.5%

We’ll just be using the simple interest amount – the actual amount of the penalty could be a little less than the amount quoted in the examples.

Three Month Interest Penalty :

Mortgage Balance X Interest Rate X 3 months

Plugging in the variables above, we would get:

= $300,000 X 0.055 X 0.25 (5.5% = 0.055, 3/12 = 0.25)

= $4125.00 would be the 3 month interest penalty

Now we have to calculate the interest differential – and that’s where penalties can be quite substantial – especially since interest rates have dropped considerably lately.

(0.02 = 2% which is the difference from 5.5%-3.5%, and 2 years left in term)
=$12,000.00 would be the Interest Differential Penalty

In the example above, the bank would then use the Interest Differential Penalty since that amount is the greater of the two. Remember that the way banks calculates their penalties sometimes is a mystery to me and can be greater than the figures above so make sure you ask.

Please remember that its not always about RATE, although important, there are other important steps you need to take into consideration when considering paying a penalty and shopping for a mortgage. Let a mortgage expert, put strategic steps and the right product in place that will ultimately make sure its in your best interest to pay a penalty and that your saving money.

I would also invite you to take a look at this link.I am part of a community of mortgage brokers that created a forum to get our best ideas together a create a simple and educational strategy showcased here on this website. A program I implement with all my clients, wherever they are in the mortgage process. Its a program created in mind to help consumers pay more attention to their mortgage and implement simple easy steps to save thousands of dollars. When was the last time your bank phone you up at any time to show you how to save money on your mortgage. I think i know the answer…..Please click the link and learn something valuable today then contact me to get started.

I am a licensed mortgage broker with years of financial experience, able to help you with your mortgage any where in Canada and Alberta. Remember my services are free and never should you feel there is any obligation. So please pick up the phone and contact me directly I would love to hear from you 1-888-819-6536. If your more comfortable with email please feel free to email me your questions at lisa@mortgageplayground.com

Although you will never hear any bank say that publicly, this is what is going on. Recently there has been some industry chatter about a few banks offering a sub 3% 5 year fixed product. One particular institution is bragging about their 6 billion dollar portfolio under administration, this product, and how great it is. At first glance you might think ” WOW, that’s awesome!” However as with all mortgages, you have to dig a bit deeper to find out the real nuts and bolts of this sub 3% offer. It’s a great offer alright for the bank, not for you; the consumer.

Based on an average mortgage size of $250,000, that’s 24,000 Canadians that negotiated directly with the bank who will feel ripped off once they find out about their terms and conditions. I am very pro client / consumer, and my job is to look out for their best interests so I simply can’t endorse this product. Consumers though need to know why they shouldn’t either. This product is priced well below the market average for 5 year product, and does not come without it’s “catches”. It’s definitely buyer beware and the bank will not tell you this.

Some of the features (or non-features you might say) are:

Minimal or no pre-payment privileges

This product has extremely low pre-payment features. On a monthly increase basis this could mean nothing to less than half of what the industry norm is. Lump sum payments may also be nothing or less than half the industry norm and if allowed only once per year. Pre-payment features are extremely beneficial and allow for strategies to be put in place. Lack of strategy means lack of interest savings for clients and consumers.

Fully Closed

When I say fully closed, I mean just that. A borrower cannot get out of the mortgage, unless they sell their place if at all. Who wants to sell their place if they want to refinance? I don’t know too many people that would. If borrowers do sell their place, a substantial penalty such as a 6 month interest penalty typically applies. Borrowers may be offered a reduced penalty (3 month) if they choose to refinance with that same bank however this still does not offer a borrower access to the entire mortgage market. It also confines them to more inferior product. If a borrower is going to pay a penalty, they rightfully should have the opportunity to entertain superior product. The average mortgage is in place roughly 3 years before being paid out or refinanced. Life just happens. More than likely a borrower will need to do something with their mortgage during their current mortgage term. To be locked down by these terms and clauses makes absolutely no sense.

No guarantee of best rates upon renewal or refinance

Banks know that consumers may not know the mortgage market at any particular point in time. What’s happening in the mortgage world is usually not on the forefront of people’s minds. When it comes time to renew or refinance borrowers can be offered a rate as high as 1% above the market norm and not realize it. When a borrower asks the bank to do better, they may be offered a discount further however that .5% “special” discount doesn’t look so good when the rest of the market is priced much lower. This amounts to more interest the borrower has to pay over the course of their mortgage. This is more money for the bank that should be staying with you.

Your mortgage will also be registered as a collateral charge.

Beware of this one as it is a very sly practice among banks. What does a collateral charge mean to a borrower? The bank will instruct the lawyer to register the title as a running account. More than likely you running account will have a global limit of the property value itself. This doesn’t mean you are going to get this money, it just means that your property is fully tied up. If you choose another lender at renewal, legal fees apply. A second mortgage or Line of Credit can’t be put behind this product because the bank has tied up ALL of your equity. No matter which way you turn, the bank has shackled you to more costs and fees.

The lesson here is that rate is not everything. Product and Strategy is. Borrowers need flexible product to execute strategy.

A majority of homeowners in British Columbia won’t know what has happened to their property value over the past year until they receive their annual BC Assessment notice in early January 2012.

Each year, BC Assessment sends out Property Assessment Notices on December 31 for nearly two million properties in British Columbia. Local real estate sales determine the property values that BC Assessment reports based on a market value approach with a July 1 valuation date.

However, some BC property owners have received an early indication of what to expect when BC Assessment releases their 2012 Assessment Roll figures on Tuesday, January 3, 2012.

On December 5, 2011, BC Assessment sent out approximately 10,000 “Extreme Value Change” information letters to BC property owners where the assessed value of their property increased by 30% or more above their local area.

These BCA information letters are sent to property owners as part of the pre-roll consultation process for significant value change where the assessed value of a property increases more than the average increase in an area.

“Generally speaking, for property owners whose 2012 assessments have increased 30% or more above the average increase for their local community, we have provided advanced letters informing them of this change,” said Tim Morrison, Communications Coordinator for BC Assessment, in an interview with BuyRIC.com.

“For example, if the average market increase for a specific property type within a specific jurisdiction was 5% and your property increase was 35% or higher, then you would likely receive an advanced letter.”

This advanced information indicates that approximately 10,000 BC property owners across the province will see a 30% or higher than average increase in their 2012 assessment notices.

The most significant 2012 property assessment increases in British Columbia occurred in Vancouver. BC Assessment sent out approximately 1,800 of these “Extreme Value Change” letters to Vancouver property owners and approximately 800 to the North Shore, including West Vancouver and North Vancouver property owners.

Morrison added, “We provide impacted property owners with advanced notification in order to make them aware that the change will likely result in an increase in their 2012 property taxes as determined by their local municipality.”

“We want to ensure that people know that they can contact us, so that we can work with them in explaining our market analysis techniques used to assess their properties.”

BC Assessment serves to ensure accurate, fair, and equitable annual assessments throughout British Columbia. Local governments and other taxing authorities are responsible for property taxation and, after determining their own budget needs in the spring, will decide their property tax rates based on the assessment roll for their jurisdiction.

These “Extreme Value Change” information letters are part of BC Assessments “no surprises” focus to engage BC property owners and local governments on changes that might have a big impact on property valuations.

Thank you to one of my fellow brokers for writing this article. Consumers are becoming slightly more educated about shopping for a mortgage, but clearly not enough, that means we have alot more work to do to make sure consumers are much more informed about their options when shopping for a mortgage wherever they are in the mortgage process. READ ON…

Every now and then we see a mortgage stat that’s a jaw-dropper.

This finding from Manulife Bank is one of them. It suggests there are a lot more people with money to burn than one might expect.

Manulife recently surveyed 1,000 Canadian homeowners between the ages of 30 to 59. Among respondents with a mortgage, two-thirds (65%) did not compare mortgages from more than one lender when they last renewed.

More specifically:

20% stayed with their current lender after maturity and did not negotiate

45% stayed with their current lender and tried to negotiate a good deal, but did not shop around

35% compared mortgages from several lenders and choose the best overall lender and product.

The youngest group (ages 30-39) was most likely to shop around (41%), but was also most likely to
accept their current lender’s offer without negotiating (24%).

We asked Doug Conick, President & CEO of Manulife Bank, why on earth people would give so much power to their lender.

“Most people lead very busy lives and may not have the time or expertise to fully investigate their options,” he said.

“Through our debt survey we’ve found that only about 3 out of 10 Canadians work with a financial adviser to manage their debt more effectively.”

“With busy lives and a lack of advice for most, this decision often gets left until very close to the renewal date, causing borrowers to follow the path of least resistance and renew with their current lender.”

“The unfortunate thing,” he added, “is that this could end up costing them a lot of extra money and keep them in debt longer than they need to be.”

That’s for sure.

In our experience, people who auto-renew often pay 1/2%-3/4% more than necessary, or worse! In fact, we’ve seen innumerable people sign renewal letters at their bank’s “special offer” rate, which is usually well above the market. (Example: Today’s 5-year fixed “special offer” bank rates are 3.94% to 4.09%. That’s up to 80 basis points above competitive rates on the street.)

Even a 1/4% rate difference amounts to over $4,000 more in interest over five years, on a $200,000 mortgage with a 20-year amortization. That’s money that could normally go towards prepaying a fat chunk of principal.

It’s hard to fathom why anyone would let a lender pick their pocket like this. At the very least, folks must find it within their strength to lift up the phone and call an independent mortgage planner.

Even if you’d rather stay with your current lender at renewal, seek out a second opinion. You absolutely owe it to yourself to keep your lender honest by surveying the market.

Of course, this all begs the question of why someone would ever want to deal exclusively with a lender that aims to maximize the interest they pay…but that’s a story for another day.

Sidebar: The report also confirmed, yet again, the various studies which show that people underutilize their prepayment privileges.

In the last year, out of respondents with a mortgage, 70% did not make any extra payments.

By far, the most common reason cited for not making an extra mortgage payment was “a lack of extra money.”

Bank of Canada Governor Mark Carney held his benchmark interest rate at 1 per cent Wednesday and suggested his year-long pause will last much longer as a bleaker outlook for the global economy quashes any urgency to make it harder to borrow and spend.

In explaining the decision to leave borrowing costs alone for an eighth meeting, as expected, the central bank said it believes Canada’se conomy is growing again after stalling in the second quarter, but painted a troubling picture for the United States and Europe, and said exports will be a “major source of weakness.”In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,” the central bank said.

“The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2-per-cent inflation target over the medium term.’’

Without doing so explicitly, the central bank also left the door open for an interest-rate cut should the external backdrop deteriorate further, in part by reiterating it is less worried about inflation than just weeks ago when policy makers hinted they might raise rates by the end of the year.

Still, the Canadian dollar made a small gain against the U.S. currency after Mr. Carney’s decision. And economists generally interpreted his language as suggesting he will stay on hold until mid-2012 or later, but reckoned he will eventually need to raise rates if the rebound survives the current turmoil.

“Once again, the tug-of-war between offshore and internal factors is holding the Canadian economy and Bank of Canada policy in limbo,’’ Michael Gregory, a senior economist at BMO Nesbitt Burns, said in a note to clients. “We still judge (as does Carney & Co.) that at least modest growth will resume in(the second half of 2011) and push the Bank’s policy bias back to the tightening side.’’

Policy makers did not include new projections for growth and inflation in their statement, tracking closely to comments Mr. Carney made on Aug. 19, when he appeared with Finance Minister Jim Flaherty before an emergency meeting of the House of Commons finance committee. The recovery has likely resumed, the bank said, after gross domestic product shrank at a 0.4-per-cent annual rate in the second quarter, and growth will be led by business investment and household spending.

However, policy makers said, “lower wealth and incomes will likely moderate the pace of investment and consumption growth,” even as the supply and cost of credit for both businesses and households “remain very stimulative.”

Financial conditions have tightened some and could continue to do so should the global situation worsen, the bank said. Plus, net exports – the difference between what Canadians buy from overseas and what they sell abroad – will be a big drag on the economy, both because of weaker demand around the world and because of “ongoing competitive challenges” like a currency that, while weaker in recent weeks, is still near parity.

Several of the “downside risks” the central bank has identified for the global rebound’s trajectory have come to fruition, policy makers said.

The fiscal and financial strains linked to Europe’s crisis have caused upheaval in markets as investors shy away from risk, and “could prompt more severe dislocations” in global markets.

Resolving those strains, the bank said, “will require additional significant initiatives by European authorities,” – an obvious yet significant comment given that in July the central bank said its outlook for the economy at that point assumed that Europe would be able to contain the crisis.

South of the border, Canada’s main export market will see weaker growth than the central bank was anticipating, policy makers said, and household spending “will be even more subdued in the face of high personal debt burdens, large declines in wealth and tough labour market conditions.”

Moreover, the stimulus spending that propped up the U.S. recovery from its worst downturn since the Great Depression will soon give way to restraint and cuts that will undoubtedly crimp U.S. growth.

And although growth in emerging markets like China and India is still “robust” and commodity prices will remain “relatively high,” as those rapidly-expanding economies lift the rest of the world, they too will be affected by sluggishness in the developed world, as consumers and businesses everywhere retrench.

The global recovery’s decline in momentum will keep Canadian inflation in check, the bank said, as energy and food prices ease, wage growth “stays modest” and Canadian companies improve their productivity in the face of the slowdown.

The central bank’s decision comes in a potentially pivotal week that features a bevy of central bank policy meetings, a major speech by U.S. Federal Reserve chairman Ben Bernanke and a nationally televised address by U.S. President Barack Obama before a joint session of Congress, where he is expected to unveil a $300-billion (U.S.) plan to kick-start hiring in the world’s biggest economy.

The week concludes with a gathering of finance ministers and central bankers from the Group of Seven nations in Marseille, France, on Friday and Saturday.

Mr. Carney’s next interest-rate decision is scheduled for Oct. 25, and he will release an updated forecast for the Canadian and global economies the following day.